Getting Grilled: Price BBQ Cuts

By

Curt Thacker

Updated May 21, 2007 12:01 am ET / Original Sept. 15, 2019 6:03 am ET

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WHAT BESIDES RAIN COULD DAMPEN A SUMMER cookout? this grilling season, the answer may be high meat and poultry prices. Wholesale prices for each of the three main categories -- beef, pork and chicken -- have heated up since last year, but beef and chicken prices have increased the most. According to the U.S. Department of Agriculture, boneless/skinless chicken breasts are up about 60 cents a pound wholesale, or 55%, from this time last year, while choice-grade beef loins are about 15 cents, or 6%, higher. Bone-in pork loin prices are about six cents, or 5% higher than a year ago.

While grocers may absorb some of the hike to maintain attractive retail prices, the balance will be passed on to consumers.

Several factors have combined to boost meat prices across the board. For beef, it was this past harsh winter, which hampered cattle growth and grading potential; for chicken it was reduced supplies. And all livestock producers face higher feed and fuel costs; as a result, many popular cuts will cost consumers more from now through Independence Day, or beyond.

At this time in 2006, chicken-breast and leg-quarter prices were rebounding from record-to-near-record lows hit in April, and grocers were scooping up lots of these cuts for Memorial Day shoppers. The low chicken prices also weighed on wholesale beef and pork prices, owing to an overall abundance of animal protein. This year, however, U.S. beef and chicken production in the second quarter is below that of a year ago, while pork output is slightly higher.

Bob Wilson, an analyst with HedgersEdge.com, a commodities brokerage and analyst firm in Englewood, Colo., says that because of U.S. population growth, the decline in domestic supplies of beef and chicken is even more pronounced. Those supplies could be further reduced for both categories if exports increase. "Bottom line is that the higher wholesale prices reflect tighter per-capita supplies," Wilson says. "It's basic economics, really,"

For many people, backyard grilling is a way to break out of the grip of a long winter, enjoy the renewal of spring and feast on comfort foods, Wilson says. The question is, will those traditions live on, given the higher costs consumers face not only for meat and but also for gasoline?

Bruce Longo, analyst with Urner Barry's Yellow Sheet, a private agriculture-market-reporting firm in Bayville, N.J., predicts that shoppers may go to their favorite supermarkets intending to purchase a porterhouse or T-bone steak, but upon seeing the higher price tags for those premium items, trade down to a cheaper sirloin or London broil. Some might even switch categories and purchase pork chops or chicken breasts instead.

Key Commodity Indexes

CRB Group Indexes

5/18

Prev. Wk

Yr. Ago

CRB Futures

404.14

405.71

384.68

Industrials

379.80

389.37

401.31

Grain/Oils

280.64

281.34

220.14

Livestock

310.22

311.11

270.71

Energy

683.09

669.74

655.50

Precious Metals

651.84

662.80

644.34

Reuters/CRB

Some retailers will offer loss-leaders for beef -- that is, will feature some cuts of meat below their cost to pull in more customers in the hope they'll purchase other items while they're in the store. Grocers, however, are willing to lose only so much money, as they must risk trying to make it up on the sale of other goods.

DJ-AIG Commodity Indexes

DJ-AIG Indexes

5/18

5/11

YTD

Commodity Futures

173.268

173.442

4%

Total Return

333.147

333.171

6%

Energy

253.213

248.332

10%

Petroleum

354.805

345.976

6%

Livestock

67.829

68.002

1%

Grains

49.835

49.424

-3%

Industrial Metals

249.423

260.440

13%

Precious Metals

110.634

112.574

1%

Softs

52.943

52.524

-19%

Dow Jones/AIG International

Analysts hold mixed views on which of the three categories will gain leverage over the others and see a boost in sales. Kevin Bost, owner/analyst of Procurement Strategies, an analysis and advisory firm in Chicago, sees pork holding an advantage due to record large production, and few other good alternatives for grocers. HedgersEdge.com's Wilson says chicken might still have a strong showing since it is the cheapest category over all.

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